Xerox 2002 Annual Report Download - page 56

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SOHO Disengagement: In 2001, we began a separate
restructuring program associated with the disengage-
ment from our worldwide small office/home office
(“SOHO”) business. In connection with exiting this
business in 2001, we recorded a provision of $239,
net of reversals of $26. Reversals were primarily relat-
ed to a higher than anticipated number of employees
re-deployed and better than expected experience in
certain contract terminations. The charge included
provisions for the elimination of approximately 1,200
positions worldwide by the end of 2001, the closing
of facilities and the write-down of certain assets to
net realizable value. The restructuring provision
associated with this action included $164 for asset
impairments, $49 for lease terminations, purchase
commitments and other exit costs, and $26 for sever-
ance and employee separation costs. An additional
provision of $34 related to excess inventory was
recorded as a charge to Cost of Sales in our Consoli-
dated Statements of Income.
During the fourth quarter 2001, we depleted our
inventory of personal inkjet and xerographic printers,
copiers, facsimile machines and multifunction devices
which were sold primarily through retail channels to
small offices, home offices and personal users (con-
sumers). We continue to provide service, support and
supplies, including the manufacturing of such
supplies, for customers who currently own these
products during a phase-down period to meet
customer needs.
During 2002, we recorded a charge of $10 primarily
for asset impairment charges for a change in the esti-
mated recoverability of the Ireland SOHO facility. The
total net costs included in Restructuring and asset
impairment charges in the Consolidated Statements
of Income for the SOHO disengagement were $10
and $239 in 2002 and 2001, respectively. Charges
against the reserve were $17 and $52 in 2002 and
2001, respectively. The SOHO Disengagement
program had been substantially completed as of
December 31, 2002, with $6 of reserves remaining for
severance and lease cancellation costs.
March 2000 Restructuring: In March 2000, we
announced details of a worldwide restructuring pro-
gram and recorded charges of $489 which included
severance and employee separation costs of $424
related to the elimination of 5,200 positions
worldwide, asset impairments of $30 and other exit
costs of $35. An additional provision of $84 related to
excess inventory primarily resulting from the planned
consolidation of certain warehousing operations was
recorded as a charge to Cost of sales. In late 2000, as
a result of weakening business conditions, poor oper-
ating results and a change in focus of our new senior
management team toward increasing liquidity, we re-
evaluated the remaining plan elements. As a result of
this re-evaluation, we reversed $120 of the original
charge. The amount reversed consisted of $97 related
to severance costs associated with approximately
1,000 positions and $23 related to other costs. The
most significant reversals related to an aggregated
$72 for the abandonment of our plans to outsource
warehouse facilities in North America, as well as the
outsourcing of a product manufacturing line. As 2000
progressed and the Turnaround Program was
announced, new senior management determined that
the costs required to complete the planned actions for
both of these initiatives and the estimated payback
periods were not in line with their objectives. Based
on the changes in facts and circumstances, we deter-
mined that the reserve should be reversed. The
remaining $48 of reversals related to attrition, as well
as management’s assessment of remaining employee
terminations, in light of the newly announced
Turnaround Program, which involved $71 of new sev-
erance charges in the fourth quarter of 2000. During
2001, we recorded additional provisions of $83 which
included $68 for severance and related costs, asset
impairments of $13 and other exit costs of $2 for
instances when the actual cost of certain initiatives
exceeded the amount estimated at the time of the
original charge. We also recorded reversals of $17
associated with the cancellation of certain service and
manufacturing initiatives. We provided an additional
$5 in 2002 to complete certain severance-related
actions. We recorded asset impairments of $13 and
$30 in 2001 and 2000, respectively. The total net costs
included in Restructuring and asset impairment
charges in the Consolidated Statements of Income for
the March 2000 Restructuring were $5, $66 and $369
in 2002, 2001 and 2000, respectively. Charges against
the reserve were $17, $204 and $176 in 2002, 2001 and
2000, respectively. As of December 31, 2002, the
March 2000 Restructuring Program had been
completed.
1998 Restructuring: During 2001, we recorded addi-
tional provisions for changes in estimates of $15 and
reversals of $8, primarily as a result of changes in
certain manufacturing initiatives. The total net costs
included in Restructuring and asset impairment
charges in the Consolidated Statements of Income for
the 1998 Restructuring was $7 and $1 in 2001 and
2000, respectively. Charges against the reserve were
$24, $76 and $247 in 2002, 2001 and 2000, respective-
ly. As of December 31, 2002, the 1998 Restructuring
Program had been completed.
Reconciliation of Restructuring Charges to
Statements of Cash Flows: The following is a reconcil-
iation of charges to the restructuring reserves for all
restructuring actions to the amounts reported in the
Consolidated Statement of Cash Flows as Cash pay-
ments for restructurings: